Who this applies to
Arkansas's retainage statute is written for one kind of job: a construction contract between a public agency and a contractor who has to furnish a performance bond [1]. On those contracts it limits what the agency may hold back from the contractor's earned progress payments and fixes when the money comes back.
Private construction sits outside it. Section 22-9-604 belongs to the Public Works chapter of the Public Property title and speaks to contracts with a public agency [2], and no statewide statute caps retainage or dates its release on a private job. There, the retainage clause the parties signed is the rule, and a lawyer is the person to read it with.
This page covers the agency's side of the ledger. What a prime contractor may withhold from its own subcontractors on the same public job is a question for the subcontract and a lawyer.
What the rule says
Each earned progress payment on a covered contract divides 95/5: the contractor receives 95% when the payment falls due and the agency keeps 5% [1] to assure faithful performance. No retainage comes off the part of a payment that covers materials or equipment the contract requires the contractor to buy and store, whether on the job site or in a bonded warehouse [2]. Everything the agency withholds is held in escrow and goes to the contractor within 30 days [2] after the contract is substantially completed.
How to comply
On a public contract, set the contract documents beside the statute:
- Coverage. The 5% figure [1] attaches where the agency's contract requires a performance bond; confirm both points in the bid and contract documents.
- Percentage. A clause holding back 10% repeats the 90/10 split that Act 193 of 2009 replaced; since that Act the agency's share is 5% [1].
- Stored materials. The portion of a pay application for required materials or equipment stored on site or in a bonded warehouse carries no retainage [2].
- No midpoint cut-off. The earlier text stopped further retainage once the project architect or engineer certified the contract 50% complete; Act 193 of 2009 struck that rule [1], so reaching the halfway mark changes nothing.
- Release date. Count 30 days [2] from substantial completion for the escrowed balance. Where the contract allows phased work completed on partial occupancy, retention is partly released within 30 days [1], in direct proportion to the value of the part that is finished.
On a private contract there is no statute to lay beside the clause. The percentage, any reduction and the payout date are whatever the signed contract says, and a lawyer is the one to read them against Arkansas law.
What changed recently
Act 471 of 2007, § 3, approved March 23, 2007, set out § 22-9-604 with the escrow requirement and the 30-day payout [2]. Act 193 of 2009, § 10, approved February 19, 2009, moved the split from 90%/10% to 95%/5% and deleted the 50%-completion step-down [1].
Related
- Retainage calculator: pay-application math with retainage held back, for checking an agency's figures against the statute.
- Retainage laws by state: the private and public rules in other states.